GBP/USD lost further traction and battles to retain the 1.2500 mark after hitting an intraday high of 1.2575. Stock markets turned south after the release of upbeat American data, providing fresh legs to the US Dollar rally.
As of writing, GBP/USD was trading near 1.2575, where the Fibonacci 50% retracement level of the latest downtrend is located. Once the pair stabilizes above this level and starts using it as support, it could target 1.2620-1.2630 (200-period Simple Moving Average (SMA), Fibonacci 61.8% retracement) and 1.2700 (Fibonacci 78.6% retracement) next.
On the downside, first support could be seen at 1.2555 (100-period SMA) before 1.2525 (Fibonacci 38.2% retracement), 1.2500 (round level, 50-period SMA) and 1.2460 (Fibonacci 23.6% retracement).
GBP/USD capitalized on the broad-based US Dollar (USD) weakness and registered impressive gains on Monday. The pair continues to stretch higher in the European session on Tuesday and trades near the key resistance area at 1.2575.
The improving market mood made it difficult for the USD to find demand at the beginning of the week. Risk flows dominated the action in financial markets and triggered a USD selloff after the Washington Post reported that US President-elect Donald Trump's aides were exploring tariff plans that would be applied to every country but only cover critical imports.
Later in the day, Trump disputed this claim in a social media post and helped the USD find a foothold, calling the story "just another example of fake news."
The ISM Services PMI report for December and JOLTS Job Openings data for November from the US will be watched closely by market participants in the second half of the day.
The headline ISM Services PMI is expected to rise to 53 from 52.1 in November. A reading below 50, which would point to a contraction in the service sector's economic activity, could put additional weight on the USD's shoulders and open the door for another leg higher in GBP/USD. Conversely, a strong print of 55 or higher could support the USD.
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